Beneficiaries

05/14/2019

The retirement savings for single women can be lower than married, or even widowed, women. That should be taken into consideration, when planning retirement, according to Barron’s in “The Single Woman’s Guide to Retirement Planning.” Married women may face a steep decline in income when their spouses dies. However, their single peers don’t have the opportunity to inherit a partner’s assets and spousal benefits from Social Security.

Most retirement advice is geared toward couples. There needs to be a different plan for singles, because no one is going to save with them. They need to save and plan more.

Retirement security for Gen Xers was the topic of a study from the Employee Benefit Research Institute. This is the generation that was born between 1961-1981. The study found that only in one group of Gen Xers — single women — were 50% at risk of not having enough money to cover retirement basics. The average expected shortfall was as high as $73,000. That’s twice the estimated average shortfall for single men and more than triple that of widows. The gap continues into the highest income levels.

Americans are staying single longer and marriage rates are declining. Those trends, and the relatively new phenomenon of “gray divorce,” points to more women facing this scenario in the near and distant future. A little more than half of millennials, have never been married. When today’s older retirees were the age of today’s millennials, they were mostly married — only 17% were single.

Because the risk of running out of funds is higher for women, some advisors favor a more conservative approach, with lower expected returns on an investment portfolio. Add to that, the fact that women provide much of the care-giving to others and afterwards end up having to look after themselves. Perhaps that’s why so many occupants of nursing homes are women.

Advisors to women also recommend that they purchase insurance to help with the cost of long-term care. The first phase tends to come from family members. However, if you don’t have children or family living nearby, you have to be more careful about planning for long-term care costs.

About two thirds of people living alone at home over age 85 are women, according to a 2017 study from the Society of Actuaries. Living at home brings its own challenges and costs. Advisors tell single women that they should consider continuing-care retirement housing earlier than married couples.

Estate planning is especially important for single women. It’s crucial to be sure that documents, including a will, a HIPAA waiver, and powers of attorney are in place, while they are well. For those who have trouble naming a proxy due to a lack of family, an estate planning attorney can help to identify a financial institution that can serve as a proxy and act as a co-trustee.

Finally, single women need to check on the beneficiary designations on their accounts. Some pensions do not allow for non-spousal beneficiaries, so it might be better to roll the pension into an IRA.

Lee Bouvier Radziwill, sister of Jacqueline Kennedy Onassis, left her entire estate to her only living child, Anna Christina Radziwill. Neither of her nieces, Caroline Kennedy or her widowed daughter-in-law, received assets.

It’s quite a contrast to Jackie Kennedy Onassis’ will, which generously instructed that each of Lee’s children were to be given $500,000. However, the relationship between the ex-princess and her daughter-in-law Carole DiFalco Radziwill allegedly waxed and waned, after her son Anthony’s death from cancer. Lee herself was said to be hard pressed for cash, because of an extremely extravagant lifestyle, but her own mother had set up a trust for her benefit decades ago.

Radziwill’s last will and testament was signed on Sep. 20, 2018, less than five months before she passed away. She died at age 85 of apparent natural causes in her apartment in New York City.

Because her son Anthony predeceased his mother, her will stated that she has one child, named Christina. She directed her executors to sell her New York City co-op apartment as soon after her death as may be practicable and to dispose of the proceeds, as part of her estate.

Throughout her high-profile life, Lee would reportedly turn to her sister Jackie and ask for funds to finance her lavish lifestyle. In response, Jackie did not leave any money for her sister in her own will, explaining simply that she had provided for her sister during her lifetime.

Lee was married to three men, who left her substantial funds. The last was Herbert Ross, a wealthy director and producer. However, in her own will, light is shed on a trust set up for her by her mother, Janet Lee Auchincloss, a leading member of American society in Newport RI, and Washington, D.C.

The executor of Lee’s wills are two friends, one who lives in Cornwall CT and another who lives in Harding Township, NJ.

Lee’s relationship with her daughter-in-law received a nice grace note, when Carole wrote about her mother-in-law and said that even though her husband was gone and there were no grandchildren, which often bonds in-laws, Lee always introduced her as her daughter-in-law, and even after long absences, she never wavered.

Ironically, the first item in her estate states that all debts and funeral expenses be paid as soon as practicable, and that no extraordinary means or special accounting loopholes be taken to avoid paying any death taxes. That’s an interesting comment from someone who was blessed with wealth, glamour and connections, but never had enough money to fund her own lifestyle.

03/28/2019

It might be wise to consider the future of your pets, when it comes to estate planning because, as it turns out, up to a half million pets a year end up in shelters after their owners die, according to the Humane Society. As a society we may spend billions on our pets during our lifetime, but they may end up in shelters, according to The National Law Review in “Estate Planning For Your Pets.”

The answer is to include your pet’s care in estate planning, just as you do for family members. The first major consideration is to name who you would want to be responsible for your pet, if you should become incapacitated. Make sure that person is willing to take on the role of caretaker and that they have sufficient room in their homes (and their hearts) for your pets.

If they agree, then start by preparing a sheet with this basic information:

What does your pet eat? Do you give him/her treats, and if so, what kind?

What does your pet do when she/he is nervous or anxious? What calms them down?

What other information would you want someone to know, in your absence?

For planning for your pets after you die, you can designate a caretaker. This may be the same person who agreed to care for your pet, if you became incapacitated. You can do this in a last will and testament or a revocable living trust. You’ll also need to provide funding for the care of your pet.

You can use a trust as an alternative to an outright distribution of funds to the caretaker. The pet trust would be overseen by a named trustee, who would be responsible to ensure that funds are used to benefit your pet(s). Make sure to allot a reasonable amount of money to cover the cost of veterinary care, grooming, feeding, training and any additional expenses.

You don’t have to be a wealthy person to have this arrangement in place. It is simply a practical matter to ensure that your furry family members are taken care of, after you pass away. Another factor to consider: what is the average age expectancy of your pet? A parrot could easily live 60 to 80 years, and a horse could live for four decades. The care and feeding of a horse will be considerably higher, than for a golden retriever or house cat.

An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances and may include protection for your pets.

In some states, probate is not an expensive or overly time-consuming issue. Texas, for example, has what is called an independent administration. Executors handle the tasks involved in settling an estate and distributing assets to beneficiaries. As a result, there’s very little court involvement. However, that’s not the case everywhere. An estate planning attorney in your area will be able to explain the details of your state’s procedures and discuss whether a trust is right for your estate. They’ll also explain the difference between different types of trusts.

The trust most frequently used to avoid probate, is known as a revocable management trust, living trust or an “inter vivos” trust.

Selecting the best type of trust for each situation is different. Here are some advantages of living trusts:

Avoiding probate. The cost of probate alone is oftentimes reason enough to use a trust. An additional benefit is that a trust can help keep your asset list private, by ensuring that it is only seen by beneficiaries.

Asset management for incapacity. A living trust goes into effect, while you are alive. If you become incapacitated, an alternate trustee can step in to manage assets, pay bills and ensure that finances are taken care of.

Avoiding probate in another state. If you own out-of-state property, your estate may need to be probated in your home state and in the other state. If you have a living trust, out-of-state parcels of land can be deeded into the trust during your lifetime, thus avoiding the need for probate in another state. After your passing, your trustee can handle the out-of-state property in the living trust.

Administrative ease. There are, unfortunately, instances when Power of Attorney can be challenged by financial institutions. The authority of a trustee is more likely to be recognized, by banks, investment companies, etc.

There are some questions about whether it’s better to have a living trust or a will. The most complex part of having a living trust, is the process of funding the trust. It is imperative for the trust to work, that every asset you own is either transferred into the trust or re-titled into the name of the trust. If assets are left out or incorrectly funded, then probate will probably be necessary. This can occur, even if only one single asset is left out.

Funding the trust becomes complicated, when retirement accounts are involved. Consult with an experienced estate planning attorney, if you want to make a trust a designated beneficiary of a retirement account. This is because very specific and complex rules govern the ability to “stretch” the distributions form the account.

An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances.

03/21/2019

If you decide you don’t need your Individual Retirement Account (IRA) to fund your retirement, you have some options to fit it into your estate plan. However, beware the potential complications, according to the Oakdale Leader in “Leaving An IRA As An Inheritance.”

If no beneficiary is named to the IRA, things can get complicated for both the estate and the heirs. If the IRA has a named beneficiary, but the will names someone else to receive the IRA, the beneficiary named in the IRA is the one who receives the asset. The named beneficiary in any account and especially an IRA, supersedes the will, in almost every instance.

Anytime there is a significant event, often called a “trigger” event, like a divorce, marriage or birth, the estate plan and all accounts with named beneficiaries should be reviewed. This is to ensure that the assets go where the owner wants them, and not to an unintended heir, like an ex-spouse.

There are special rules for spouses, where IRAs are concerned. Married couples typically name each other as beneficiaries on their IRAs. A surviving spouse has certain decisions to make, when inheriting an IRA. The IRA may be rolled over into a new or existing IRA in the spouse’s own name. Taking this route depends upon the age of the spouse and the need for the money.

Another option is to convert the inherited traditional IRA into a Roth IRA. However, taxes must be paid on the conversion. An estate planning attorney will be able to explain all the options and how they will work with the surviving spouse’s estate plan.

To maximize the growth of the IRA, children or grandchildren can be named as IRA beneficiaries. They will need to start taking annual Required Minimum Distributions (RMDs) immediately, and the distributions will be taxable. However, the amount of the RMD will be based on their anticipated lifetimes, so the taxable distributions will be relatively small. The money in the account will have many years to grow.

When children or grandchildren are named as contingent beneficiaries, a surviving spouse has the option to disclaim the IRA, which allows the children or grandchildren to inherit the IRA and enjoy the tax-free years of growth.

Our office counsels against naming an estate as a beneficiary, because it helps avoid probate and strict distribution time limits.

An estate planning attorney can advise you in creating an estate plan that fits your unique circumstances and may include an IRA.

“Dying intestate” is the term used to describe the legal status of someone who has died without a will. The laws of your state will then dictate what happens to your assets. Most of your tangible possessions will be distributed following probate. If your estate is complex, for example, and you own property in more than one state, the process will take a long time and the costs will be high. A trust-based estate plan that is updated regularly—can prevent this and many other scenarios.

Some of your assets do not pass to heirs through a will. This includes retirement accounts, life insurance policies and annuities. All accounts that have named beneficiaries go directly to the people who are named. If they predecease you, then the contingent beneficiary receives the asset.

Reviewing beneficiary designations is as important as reviewing your entire estate plan. If you name only your son as the beneficiary for your insurance policy, then later welcome a daughter into your family by birth or adoption, you’ll want to add her as a named beneficiary as well. Otherwise, when you die, only your son will receive the proceeds.

Anytime a life event occurs—births, deaths, divorces, marriages—is the right time to review your beneficiary designations.

You can make these changes while you are living. When you die, the designation is irrevocable.

Your estate plan also needs to include two different types of Power of Attorney (POA). The first is to make financial decisions if you are incapacitated, and the second is to make health decisions.

The person you give the POA to has authority to make these decisions for you, only while you are alive. The POA terminates upon your death.

Most people name their spouse for their healthcare POA, but if your spouse passes and you have adult children, one of them should be named your healthcare POA. Regulations about healthcare have put medical professionals into a difficult situation when they want to have the family involved but are legally unable to share information.

Here’s a celebrity story that serves as a perfect example. A famous father made his third wife his executor and gave her total control over his business, despite the fact that his son was equally famous and the top executive in that business, as well as its public face. The son was baffled when he learned that the third wife now controlled the business, including the rights to his own name. When the father died, a long, expensive and unpleasant estate battle began. The son was Dale Earnhardt Jr.

An estate planning attorney can advise you in creating an estate plan that fits your unique circumstances and can help your family to remain together.

01/08/2019

An inherited IRA can provide a lot of security. However, it can also become a problem, if it is not handled correctly, according to CNBC in “Leaving an IRA to a loved one? How to avoid a tax bomb.” You can structure the distribution, so your children or grandchildren receive the best benefits.

Naming a trust as an IRA beneficiary is a good way to protect large IRAs, since it provides some means of control. By naming a trust, you can protect heirs who are minors, vulnerable to creditors, not able to handle large sums of money or disabled. Trusts only need $12,750 of taxable income in 2019 to be subject to the top tax rate of 37%.

If you don’t structure the trust right, you could accelerate the liquidation of the IRA at warp speed.

Most people think of their spouse, when it comes to naming a beneficiary for an IRA. Unless your spouse needs the funds, it’s best to name the next generation. What are the pitfalls? Not all IRA custodians allow you to list a trust on the beneficiary form. The tax code has very specific conditions, when trusts are the beneficiaries of retirement accounts. If you fail to follow the rules, your heirs could face huge tax bills. For a trust to be viable as a designated beneficiary, it must meet a four-step test:

It must be valid under your state’s laws.

It must be an irrevocable trust, or one that will become irrevocable upon your death.

Beneficiaries must be identifiable from the trust document.

The IRA custodian or trust administrator must have received a copy of the trust by October 31 of the year after the death of the IRA’s owner.

The beneficiaries must be people, not charities and not your estate. If your beneficiaries are not people, then your IRA may not have a designated beneficiary. In that case, your heirs can’t stretch the IRA by taking required minimum distribution,s based on the longer life expectancy of a child or a grandchild.

Worse—if your trust fails to meet the test, it is subject to the same rules as if there was no designated beneficiary at all. That means it’ll be depleted faster than you may have wished. If you die before you start taking RMDs (70½) then the IRA must be distributed within five years after death. If you die after you start taking RMDs, then distributions pay out over what would have been your life expectancy.

An estate planning attorney can advise you in creating an estate plan that fits your unique circumstances and can include a trust that works best for you.

12/13/2018

There have been a number of celebrities such as Stan Lee, Aretha Franklin and Prince in the news in recent years, who have passed away with controversies surrounding either estate plans or lack of estate plans. However, that does not have to be the case as long as a few steps are followed, according to MarketWatch’s article “Stan Lee’s tangled web of estate planning and how to avoid this mess.”

Lee, publisher and chairman of Marvel Comics, died at age 95 after a year-long illness. He is survived by his 68-year-old daughter, J.C., and has faced a number of unpleasant and public challenges in the last few years. His wife of nearly 70 years died in 2017, and earlier this year he was accused of sexually harassing nurses and home aides.

Lee also reported that about $1.4 million were missing from his bank accounts, and that $850,000 was stolen to purchase a condo.

Lee had also retained and fired a number of business managers and attorneys in recent times. He said he had handled most of his money management by himself in his early years but then realized he needed help. Unfortunately, some of the people he trusted were people who later proved to be untrustworthy.

It is yet unclear whether Lee had a will or any trusts in place. Many celebrities do not have these documents, putting heirs and potential beneficiaries in a position where they have to battle it out in a courtroom setting. Aretha Franklin and Prince are just two examples of high-profile, mega-million estate disasters.

For the rest of us, estate planning is fairly straight-forward, as long as we get it done. There are a few steps everyone needs to take, including planning for incapacity or disability, getting important documents prepared, such as a will and power of attorney, and reviewing beneficiaries.

What often happens is that as people age, they suffer cognitive decline in varying degrees and there’s a professional or a family member who believes this is occurring. In Stan Lee’s case, he signed a document stating that his daughter spent too much money, yelled and screamed at him and had befriended three men with intentions to take advantage of him (from the Hollywood Reporter). A few days after the document was notarized, Lee took it back.

As people become less confident in what they’re doing, they are susceptible to being manipulated by other people.

Having an estate plan set up years in advance of any cognitive decline, is one way to protect against these kinds of situations.

For Lee’s estate, the sheer volume of documents will be a challenge. There may be many lawyers and business managers and accountants showing up, all claiming to have been brought onto the team with specific directions upon his death.

Regular people can avoid a lot of this by focusing on these questions:

How are my assets going to be simplified and organized?

Who will work with a trusted contact while I am still well. Who will do that while I am too sick to do so or after I die?

Who will decide whether I am able to make decisions on my own behalf?

How will my finances and assets be monitored as I age?

How often will I review beneficiary agreements and estate planning documents?

Who are my trusted advisors and who is responsible for what tasks?

Should my family members and/or beneficiaries be a part of these conversations?

An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances.